Unit Economics for Services Firms and What CFOs Should Track
June 11th 2026 | Posted by Christine Schneider
Unit economics for services firms comes down to three numbers, according to Andrew D Platt, who joined a CFO Recruit virtual boardroom to walk finance leaders through what drives profitability in people led businesses.
“Costs are fixed. The more your staff is utilized, the higher your margin on individual resources.”
Billable Utilization
Billable utilization is the percentage of available hours a team bills. Andrew explained that the industry average sits around 68% and moving up that curve has an outsized effect on EBIT, with high performing firms seeing close to double the profitability of firms in the middle quartile.
He flagged a curve ball in the data too, explaining that firms running utilization above 90% often turn out to be staffing shops flashing resources in and out of roles rather than delivering sustainable margin. His own sweet spot sits between 80 and 90%, high enough to drive margin without leaving teams too stretched to rotate onto development or new assignments.
The Real Gross Margin Benchmarks CFOs Should Know
From billable utilization, the conversation moved to gross margin, which Andrew described as utilization flowing through project margin once bench costs and cost to serve are factored in. Industry average gross margin sits around 35%, while top quartile firms are closer to 45% or better. Direct labor is consistently the biggest driver and Andrew pointed to the tight labor market of 2021 and 2022 as the moment many firms watched their own margins compress before wages leveled off and margin recovery followed.
Three Numbers That Drive Unit Economics for Services Firms
Andrew kept coming back to the same short list of metrics worth tracking closely:
- Billable utilization: Target 80 to 90%, since costs are largely fixed regardless of how busy the team is
- Gross margin: Aim for at least 40%, built from strong project margin less bench and delivery costs
- G&A spend: Keep total overhead in the 10 to 15% range of revenue
- Go-to-market cost: Hold this around 10% so it does not silently erode operating margin
- Project margin: Target above 45%, since this figure less bench costs becomes your gross margin
Where Overhead Quietly Erodes Operating Margin
Once the company sets gross margin, Andrew said, management can only pull the overhead lever, and over time, costs gradually build up. He raised a caution around how firms report gross margin in survey data, since owner led firms can distort the picture by underpaying themselves on paper while working long hours, making margins look healthier than they really are.
He also urged CFOs to separate direct delivery costs from operating expense cleanly, particularly for firms planning an eventual exit, since a clean cost of goods sold line makes normalizing add backs far easier during due diligence.
“Once your gross margin is set, you’ve got one lever left and that’s how much is going to overhead.”
In Summary
Andrew closed on where the model is heading. Rising AI spend is starting to blur the line between technology that replaces delivery headcount and technology that simply supports firm operations and CFOs need to know which side of that line their spend sits on.
He also expects a shift away from time and materials contracts toward more milestone and fixed fee work, which makes tight control over work breakdown structure and scope even more important, since a poorly scoped milestone can quietly wreck gross margin without anyone noticing until the numbers land.
